Supreme Court, Appellate Division, Second Department, New York.

WELLS FARGO BANK MINNESOTA, National Association, as Trustee, without Recourse, Plaintiff-Appellant, v. JOSEPH MASTROPAOLO, Defendant- Respondent. No. 2006-00417. March 9, 2006. Appellant's Brief Samit G. Patel, Esq., Fein, Such & Crane, LLP, Attorneys for Plaintiff-Appellant, Wells Fargo Bank Minnesota, National Association, as Trustee, without Recourse, 747 Chestnut Ridge Road, Suite 200, Chestnut Ridge New York 10977, (845) 371-4700. STATEMENT PURSUANT TO CPLR 5531 1. The Index Number in the trial court was 101817/05. 2. The full names of the parties are set forth above. Plaintiff initially included Defendants: "JOHN DOE # 1-5" AND "JANE DOE #1-5"said names being fictitious, it being the intention of Plaintiff to designate any and all occupants, tenants, persons or corporations, if any, having or claiming an interest in or lien upon the premises being foreclosed herein. However, the John and Jane Does served with process herein failed to provide their names and the Order disposing of this matter failed to include said Defendants in the caption of said Order. 3. The action was commenced in the Supreme Court, Richmond County. 4. The summons and complaint were served on Defendant JOSEPH MASTROPAOLO on July 13, 2005. Said Defendant served an Answer on August 13, 2005. 5. The nature and object of the action is to foreclose a mortgage executed by Defendant JOSEPH MASTROPAOLO due to said Defendant's failure to make monthly mortgage payments. 6. The appeal is from an Order of the Supreme Court, Richmond County dated November 7, 2005 and entered November 22, 2005, made by Justice Joseph J. Maltese. 7. The appeal is being perfected by the full reproduced record method. TABLE OF CONTENTS 1. QUESTIONS PRESENTED ... 1 2. NATURE OF THE ACTION, RELEVANT FACTS, AND PROCEDURAL HISTORY ... 2 3. ARGUMENT ... 5 I. DEFENDANT WAIVED THE DEFENSE OF LACK OF STANDING BY FAILING TO RAISE SAID DEFENSE EITHER IN A PREANSWER MOTION TO DISMISS OR IN HIS ANSWER. ... 5 A. THE DEFENSE OF "LACK OF STANDING" UNDER THE CIRCUMSTANCES HEREIN, CONSTITUTES A DEFENSE UNDER CPLR. S. 3211(a)(3) ... 5 B. DEFENDANT WAIVED THE DEFENSE OF LACK OF STANDING UNDER CPLR S. 3211(e) ... 7 II. EVEN IF PLAINTIFF DID NOT HAVE STANDING, THE TRIAL COURT ERRED IN DISMISSING THE ACTION WITH PREJUDICE ... 8 A. THE TRIAL COURT SHOULD NOT HAVE DISMISSED THE ACTION WITH PREJUDICE, AS PLAINTIFF DID NOT ENGAGE IN ANY UNREASONABLE DELAY, BUT RATHER PROSECUTED THE INSTANT ACTION IN A TIMELY MANNER ... 8 APPELLANT'S BRIEF

B. EVEN IF PLAINTIFF DID NOT HAVE STANDING, THE TRIAL COURT SHOULD HAVE DISMISSED THE ACTION WITHOUT PREJUDICE TO ALLOW PLAINTIFF TO PROVIDE PROOF OF STANDING ... 12 4. CONCLUSION 15 QUESTIONS PRESENTED 1. Did the Trial Court err by not finding that the defense of lack of standing to sue was waived due to a failure to timely raise said defense in either an Answer or in a pre-Answer motion to dismiss? The Trial Court erred by not finding that the defense of lack of standing to sue was waived and by finding that Plaintiff lacked standing to sue. 2. Did the Trial Court err in dismissing the action with prejudice, under the circumstances? The Trial Court erred in dismissing the action with prejudice. NATURE OF THE ACTION, RELEVANT FACTS, AND PROCEDURAL HISTORY Plaintiff brought this action to foreclose a mortgage dated April 23, 2003, which covered real property located at 90 GRAYSON STREET, STATEN ISLAND, NY 10306 and which was executed by Defendant JOSEPH MASTROPAOLO ("Defendant") to USA MORTGAGE BANKERS OF AMERICA, INC. to secure the sum of $369,000.00. Said mortgage was recorded in the RICHMOND County Clerk's Office on November 20, 2003, in Liber 16473 of Mortgages, at Page 258, et seq. [Record, 105]. It was assigned to OPTION ONE MORTGAGE CORPORATION by Assignment recorded on May 25, 2004 in Liber 18030 of Mortgages at page 40, et seq. [Record, 109]. The Mortgage was further assigned to WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, AS TRUSTEE, WITHOUT RECOURSE, by Assignment recorded on July 22, 2005 as Instrument #0059886. [Record, 70]. Defendant JOSEPH MASTROPAOLO failed to make monthly mortgage payments, and on or about November 4, 2003, Plaintiff sent a Notice of Intent to Foreclose to said Defendant. [Record, 134]. Thereafter, Plaintiff commenced an action under Index No. 10102/04 in which Plaintiff obtained a Judgment of Foreclosure and Sale. [Record, 145]. On the eve of the foreclosure sale under that action, Defendant filed an Order to Show Cause which subsequently resulted in a traverse hearing on the issue of service of process, dismissing the action. Id. Within two weeks thereafter, Plaintiff recommenced the foreclosure, (also referred to herein as "this action"), by filing a new Summons, Verified Complaint, and Notice of Pendency in the RICHMOND County Clerk's Office on June 17, 2005 under Index No. 101817/05. [Record, 75]. Service of the Summons and Verified Complaint was made upon all necessary Defendants and the affidavits of service were duly filed in the RICHMOND County Clerk's Office. [Record, 123]. On or about August 13, 2005 Defendant JOSEPH MASTROPAOLO, through his attorney, served a Verified Answer to the Complaint. [Record, 129]. The Answer did not assert an Affirmative Defense for lack of standing or lack of capacity to sue. Id. Upon expiration of the time for all Defendants to Answer, on or around September 21, 2005, Plaintiff moved the Trial Court for Summary Judgment and for an Order appointing a Referee to compute the amount due to Plaintiff. [Record, 62]. Defendant, by his attorney, filed an Affirmation in Opposition, alleging for the first time that Plaintiff had no standing to bring the action, citing a decision by Richmond County Supreme Court Justice Giacobbe, entitled Mortgage Electronic Registration Systems, Inc.v. Burek. [Record, 154]. Plaintiff filed a Reply Affirmation stating that pursuant to CPLR s. 321 l(e) and pertinent case law, Defendant waived his defense of lack of standing. [Record, 159]. On November 7, 2005, Justice Joseph J. Maltese, issued a Decision and Order denying Plaintiffs motion for summary judgment and dismissing the action with prejudice, stating

that "insofar as the plaintiff was not the legal titleholder to the mortgage at the time the action was commenced, they had no standing to bring the action and it must be dismissed." [Record, 7]. Plaintiff now appeals every portion of that decision and order. ARGUMENT I. DEFENDANT WAIVED THE DEFENSE OF LACK OF STANDING BY FAILING TO RAISE SAID DEFENSE EITHER IN A PREANSWER MOTION TO DISMISS OR IN HIS ANSWER. The Trial Court erred in not finding that Defendant waived the defense of lack of standing. As discussed below, there is binding and persuasive precedent demonstrating that Defendant's allegation of lack of standing constitutes a defense under CPLR s. 3211 (a)(3), and that consequently, Defendant's failure to raise said defense in his Answer resulted in a waiver of that defense pursuant to CPLR s. 3211(e). A. THE DEFENSE OF "LACK OF STANDING" UNDER THE CIRCUMSTANCES HEREIN, CONSTITUTES A DEFENSE UNDER CPLR. S. 3211(a)(3). CPLR s. 3211(a)(3) states that "a party may move for judgment dismissing one or more causes of action asserted against him on the ground that the party asserting the cause of action has not legal capacity to sue." Id (2005). In Gilman v. Abagnale, Defendants appealed the denial of their motion for summary judgment, arguing that '[i]f [plaintiffs] do not possess valid legal record title, then they have no standing'(emphasis supplied)." 235 A.D.2d 989 at 990, 653 N.Y.S.2d 176 (3d Dep't. 1997). As none of the defendants in Gilman "raised plaintiffs lack of standing to sue in their respective answers to the complaint or in a preanswer motion to dismiss," the court found that "each [defendant] has waived the legal argument that plaintiffs lack standing." Id (citing Dougherty v. City of Rye, 63 N.Y.2d 989 at 991; Matter of Prudco Realty Corp. v. Palermo, 60 N.Y.2d 656; National Assn. of Ind. Insurers v. State of New York, 207 A.D.2d 191 at 197, 620 N.Y.S.2d 448 (2d Dep't. 1994); Muchnick v. Alcamo Supply & Contr. Corp., 169 A.D.2d 711, 564 N.Y.S.2d 198 (2d Dep't. 1991); CPLR s. 3211 (a)(3); (e)). Additionally, the Court of Appeals has held that "[w]hether a person seeking relief is a proper party to request an adjudication is an aspect of justiciability which, when challenged, must be considered at the outset of any litigation." Society of Plastics Indus. v. County of Suffolk, 573 N.E.2d 1034 at 1038, 77 N.Y.2d 761 at 769, 570 N.Y.S.2d 778 at 782 (1991) (citation omitted). Here, Defendant alleged in his opposition to Plaintiffs motion for summary judgment that "[i]nsofar as plaintiff was not the legal titleholder to the mortgage at the time the action was commenced, it had no standing to bring the action." [Record, 154] (emphasis added). This is the exact same argument used by the Defendants in Gilman, as there, Defendants alleged that Plaintiff did not possess "valid legal title" and thus lacked standing. 235 A.D.2d 989 at 990, 653 N.Y.S.2d 176 (emphasis added). In fact, plaintiff is the assignee of the mortgage ans would directly sustain damages if it were not entitled to foreclose. [Record, 71]. Thus, here, as in Gilman, the defense of lack of standing by virtue of not possessing valid legal title constitutes a defense under CPLR s. 321l(a)(3), and as further discussed below, Defendant waived said defense by failing to raise same in his Answer or in a preanswer motion to dismiss. CPLR s. 321 l (e); 235 A.D.2d 989 at 990-91; [Record, 129]. B. DEFENDANT WAIVED THE DEFENSE OF LACK OF STANDING UNDER CPLR S. 3211(e). Under CPLR s. 321 l(e), "an objection or defense based upon a ground set forth in paragraphs one, three, four, five and six of subdivision (a) is waived unless raised either by... [a preanswer motion] or in the responsive pleading." Id (2005) (emphasis added). "It is essential... that a party raise the legal argument of lack of standing to sue in its answer to a complaint or in a preanswer motion to dismiss." Gilman v. Abagnale, 235 A.D.2d 989 at 990, 653 N.Y.S.2d 176 (3d Dep't. 1997) (citing CPLR s. 321 l (a)(3) and Dougherty, supra. "The failure to do so is fatal in that it constitutes a waiver of this argument at all subsequent phases of the litigation." Id (citing Dougherty, supra; Matter of Prudco Realty Corp. v. Palermo, 60 N.Y.2d 656; National Assn. of Ind. Insurers v. State of New York, 207 A.D.2d 191 at 197, 620 N.Y.S.2d 448 (2d Dep't. 1994); Muchnick v. Alcamo Supply & Contr. Corp., 169 A.D.2d 711, 564 N.Y.S.2d 198 (2d Dep't. 1991)). Here, the evidence unequivocally shows that Defendant failed to raise the affirmative

defense of lack of standing in his Verified Answer. [Record, 129]. Nor did Defendant ever file a preanswer motion to dismiss. It was only after Plaintiff filed a motion for summary judgment that Defendant, for the first time, raised the defense of lack of standing. [Record, 154]. As a result, Defendant waived this defense and Plaintiff should have been granted summary judgment accordingly. II. EVEN IF PLAINTIFF DID NOT HAVE STANDING, THE TRIAL COURT ERRED IN DISMISSING THE ACTION WITH PREJUDICE. A. THE TRIAL COURT SHOULD NOT HAVE DISMISSED THE ACTION WITH PREJUDICE, AS PLAINTIFF DID NOT ENGAGE IN ANY UNREASONABLE DELAY, BUT RATHER PROSECUTED THE INSTANT ACTION IN A TIMELY MANNER. "Where a party unreasonably neglects to proceed generally in an action or otherwise delays in the prosecution thereof against any party who may be liable to a separate judgment, or unreasonably fails to serve and file a note of issue, the court, on its own initiative or upon motion, may dismiss the party's pleading on terms. Unless the order specifies otherwise, the dismissal is not on the merits." CPLR s. 3216(a) (2005). The Second Department has held that an unconditional dismissal of plaintiff's complaint was warranted where plaintiffs failed to demonstrate a reasonable excuse for the three and one-half-month delay in complying with demand for service of complaint, plaintiffs failed to submit an affidavit establishing meritorious nature of action in order to avoid dismissal, plaintiffs attorney's affirmation gave no reasonable and acceptable explanation for late service, and where an affidavit of merit was not submitted in opposition to defendants' motion. Niedermeier v. Nassau County Dept. of Social Services, 143 A.D.2d 78-79, 531 N.Y.S.2d 328 (2d Dep't. 1988). Additionally, dismissal of a complaint with prejudice was not an abuse of discretion where plaintiff had been granted several adjournments over a period of approximately one year, where plaintiff was informed before the last adjournment that no further adjournments would be granted, and, despite warning, plaintiff was not ready to proceed on final adjourned date. Hansen v. Loomis, 137 A.D.2d 584 at 585, 524 N.Y.S.2d 476 at 477 (2d Dep't. 1988). Other departments have held similarly. See Osipova v. New York Univ., 157 A.D.2d 487, 549 N.Y.S.2d 674 at 675 (1st Dep't. 1989) (holding that "[p]laintiff's refusal to go forward with selection of a jury on the appointed date for commencement of trial constituted abandonment of her claims" warranting dismissal with prejudice of plaintiff's claim); Stacey O v. Donald P, 137 A.D.2d 965 at 966, 525 N.Y.S.2d 385 at 386 (3d Dep't. 1988) (holding that "a court may dismiss a claim with prejudice where it finds that exceptional circumstances or an unreasonable neglect to prosecute merits such extreme sanction"); but see, Girardon v. Foa, 286 A.D. 809, 141 N.Y.S.2d 586 (1st Dep't. 1955) (holding that where Plaintiff did not offer a reasonable excuse for delay of six years in prosecuting action, cross-motion to dismiss for lack of prosecution was granted without prejudice to application by plaintiff to vacate order of dismissal on proper showing of reasons for delay and submission of affidavit of merits) (emphasis added). Here, the order dismissing the action, with prejudice does not even state the reason why it was dismissed with prejudice. [Record, 8]. Such an "extreme sanction" should at least warrant an explanation. Stacey O, supra, 137 A.D.2d 965 at 966, 525 N.Y.S.2d 385 at 386. The record here shows no indication that Plaintiff unreasonably delayed these proceedings. Although Defendant raised laches as an Affirmative Defense in his Answer, [Record, 129], (but did not raise same in his opposition to Plaintiffs summary judgment motion), [Record, 154], Plaintiff explained in its moving papers that Plaintiff initially filed a prior similar action under Index No. 10102/04, and that said action was subsequently dismissed by virtue of an Order to Show Cause filed on the eve of the foreclosure sale. [Record, 145]. Thus, in reviewing the subject Summary Judgment Motion, the trial court must have understood that since a foreclosure sale was in fact scheduled in that prior action, said prior action was actually dismissed after Plaintiff had prosecuted essentially the entire action, having obtained an Order of Reference, and a final Judgment of Foreclosure and Sale. Plaintiff recommenced the action by filing a Summons and Verified Complaint on June 17, 2005, a mere two weeks after the discontinuance. Under the above referenced case law, two weeks does not even come close to constituting an unreasonable delay under any circumstances. During those two weeks, Plaintiff was researching its options once the

prior action was dismissed as to how it should proceed, (i.e. whether to appeal the order of the JHO or recommence). It is respectfully submitted that these explanations constituted a "reasonable excuse for delay," Girardon, supra, 286 A.D. 809, 141 N.Y.S.2d 586, and/or a "reasonable and acceptable explanation," Niedermeier, supra, 143 A.D.2d 78-79, 531 N.Y.S.2d 328, had there even been an unreasonable delay. As Defendant did not argue in his opposition that the action should be dismissed due to laches, [Record, 154], Plaintiff was not even given the opportunity to further explain the reason for the delay, if such an explanation was even required. As Plaintiff did not unreasonably delay prosecuting this action, this action should not have been dismissed with prejudice. B. EVEN IF PLAINTIFF DID NOT HAVE STANDING, THE TRIAL COURT SHOULD HAVE DISMISSED THE ACTION WITHOUT PREJUDICE TO ALLOW PLAINTIFF TO PROVIDE PROOF OF STANDING. "The dismissal on the ground that the action was brought by an improper party does not relate to the timeliness of the original action or want of prosecution and is, thus, without prejudice to allowing plaintiffs to commence a new action based upon the same causes of action." Mingone v. State, 100 A.D.2d 897 at 899, 474 N.Y.S.2d 557 at 560 (2d Dep't. 1984) (citing Carrick v. Central Gen. Hosp. 51 N.Y.2d 242, 434 N.Y.S.2d 130, 414 N.E.2d 632; George v. Mt. Sinai Hosp., 47 N.Y.2d 170, 417 N.Y.S.2d 231, 390 N.E.2d 1156). It was held to be error to make dismissal with prejudice, thus precluding prosecution of new action, where it appeared from record that proof was available to plaintiff to enable plaintiff to readily establish a prima facie case. Giglio v. Haber, 19 A.D.2d 793, 243 N.Y.S.2d 539 at 540 (2d Dep't. 1963). Similarly, a dismissal was properly rendered without prejudice where there was a failure of proof on the part of the plaintiff. Watkins v. Pacific Finance Corp., 259 A.D. 685 at 687, 20 N.Y.S.2d 599 at 601 (2d Dep't. 1940). Also, dismissal of causes of action for pleading defects only, is without prejudice to appropriate application by plaintiff for leave to plead again as to such causes of action. Renel Const. Inc. v. Brooklyn Co-op. Meat Distribution Center, Inc., 59 A.D.2d 391 at 396, 399 N.Y.S.2d 429 at 432 (1st Dep't. 1977). Lower courts have repeatedly held similarly. Katz Park Ave. Corp. v. Olden, 158 Misc.2d 541 at 545, 601 N.Y.S.2d 757 at 760 (N.Y.City Civ. Ct. 1993) (holding that failure to plead or prove condition precedent may result in dismissal of cause of action, but new proceeding can be commenced in same court); Supreme Realty Assoc. Co. v. Korovessis, 171 Misc.2d 996 at 1000, 656 N.Y.S.2d 797 at 800 (holding that lawsuit brought by partnership in county where it had not filed certificate of doing business would be dismissed, without prejudice to partnership's ability to move to restore upon proof of filing of said statutorily required certificate). Here, it can be argued that since Plaintiff was not assigned the mortgage until after the commencement of the action, [Record, 71], just as in Mingone, it was an improper party that brought this foreclosure action such that dismissal should have been without prejudice. 474 N.Y.S.2d 557 at 560. Also, such a defect would constitute a failure of proof of a condition precedent which should have resulted, at most, in a dismissal without prejudice. See Watkins, Renel Const. Inc., and Katz Park Ave. Corp., supra. The facts here are analogous to those in Supreme Realty Assoc. Co., supra, where the plaintiff partnership did not have standing to commence an action by virtue of its failure to file a requisite certificate. There, the court dismissed the action without prejudice, properly affording plaintiff the chance to present proof of filing same. 171 Misc.2d 996 at 1000, 656 N.Y.S.2d 797 at 800. Similarly, here, the order dismissing the action expressly acknowledges that plaintiff did "take legal title to the mortgage by an assignment" on or around June 20, 2005. [Record, 7]. Thus, the trial court was aware that had it dismissed the action without prejudice, plaintiff certainly had the capability of properly recommencing the action so as to prove that it had legal standing, as the assignment constituted proof which was available to enable Plaintiff to establish a prima facie case. Giglio, supra. Here, the Court's dismissal with prejudice, due to the mere 3 days it took for plaintiff to obtain title, [Record, 7], manifests a serious injustice under these circumstances. Neither Plaintiff, nor its successors and/ or assigns, would be left with any remedy by which they could collect the amount rightfully due under the mortgage while Defendant would obtain a windfall by living at the property for free indefinitely. Thus, as Plaintiff ultimately provided proof of legal standing, the trial court should have at most, dismissed the action without prejudice.

CONCLUSION The trial court erred in not finding that the defense of lack of standing to sue was waived in this case. Under the circumstances herein, lack of standing to sue constitutes a defense under CPLR s. 321l(a)(3), and pursuant to CPLR s. 321 l(e), Defendant JOSEPH MASTROPAOLO waived said defense by not raising it in his Answer or in a pre-answer motion to dismiss. The trial court also erred in dismissing this case with prejudice without stating a reason for doing so, especially since Plaintiff did not unreasonably delay or neglect in prosecuting this action. At most, the trial court should have dismissed the action without prejudice as it was aware that Plaintiff was in possession of proof of standing to sue. WHEREFORE, for the foregoing reasons, Plaintiff respectfully requests that this Court reverse the Order of the Supreme Court, County of Richmond, denying Plaintiffs motion for summary judgment, so as to grant Plaintiff summary judgment and that this Court remand the case to allow Plaintiff to complete the foreclosure action; or, in the alternative, Plaintiff respectfully requests that this Court reverse that portion of said Order dismissing the action with prejudice, and grant Plaintiff leave to file a new action. Appendix not available.